Monday, January 21, 2013

In my last blog, I pondered whether
Andrew Jenkins could possible reform Barclays Bank. I suggested some new
principles by which he might operate in future.
Unhappily, I now realise I was wrong A major report published on Sunday 20th
January proves the depth of moral corruption and compliance-averse conduct
exercised by the Barclays Bank Wealth Division.

It describes the regime of fear
which was deliberately inculcated inside Barclays Wealth. It reports how the
boss, Andrew Tinney, lied and shredded evidence of a damning report in March
2011 which would expose the real state of affairs inside the Bank of bullying,
and how Intimidated staff were forced to deliberately ignore and flout regulatory
and compliance rules in pursuit of 'revenue at all costs'.

Such a report has issued a final
death blow to what little was left of Barclays otherwise appalling feral
reputation, and it means that Andrew Jennings' attempts to re-launch the bank, demonstrating a new 'ethical' profile,
adhering to all the public compliance norms, is not only doomed to fail, but
should be pre-empted, and the Barclays Wealth Division should be closed down as
being in the public interest.

Andrew Tinney resigned after it was
revealed that he covered up a report into Barclays Wealth's failings. He
secretly shredded a bombshell report that described a key part of the bank as
‘out of control’.

Andrew Tinney, who was chief
operating officer of the bank’s high-end private investment division, Barclays
Wealth, destroyed the explosive dossier after reading its shocking contents. He
then misled banking regulators and Barclays chief executive Antony Jenkins –
the man brought in to clean up the bank after the Libor rate-fixing scandal and
the resignation of Bob Diamond – by pretending that the report had never
existed. Tinney contributed to that state of affairs by shredding the only hard
copy and ensuring that its contents were not entered into the Barclays computer
system.

Apart from anything else, such
actions, on the part of a senior executive of the Bank are in direct
contravention of Section 172 of the Companies Act 2006, and even now, I cannot
understand why shareholders are not organising a litigation group action to sue
this man back to the Stone Age for breach of his fiduciary duties towards them.
I shall certainly watch the FSA's actions to see how they penalise Barclays for
these outrageous breaches of corporate governance and their responsibilities
towards their regulator.

This is what always infuriates me
about our financial regulatory approach. We have perfectly good laws in the UK
to regulate this kind of behaviour, but when they are breached, and it is the
banks who are involved, no-one in authority does anything about invoking the legal
powers to take action, instead they lie about their powers to act! We were lied
to by the FSA over PPI fraud, we were lied to by the FSA over money laundering
issues, we were lied to by the FSA about the relevant powers to deal with LIBOR
manipulation, all of which examples of
FSA mala fides have been identified in this blog! S.172 requires, inter alia, the
duty of a company officer to promote the success of the company.

Section 172 of the Companies Act
replaced a director’s duty to act “in good faith in the best interests of the
company” with a requirement that the director must act, in the
way he considers in good faith, would be most likely to promote the
success of the company for the benefit of its members as a whole. In doing so,
the director must have regard to the following factors:

• The likely consequences of any
decision in the long term.

• The interests of the company's
employees.

• The need to foster the company's
business relationships with suppliers, customers

and others.

• The impact of the company's
operations on the community and the environment.

• The desirability of the company maintaining
a reputation for
high standards of business conduct.

• The need to act fairly as between
the members of the company.

How Tinney could possibly have
thought that any of these objects would have been promoted by suppressing this
report is entirely beyond my comprehension, but it demonstrates the depth to
which his own personal standards of honesty, integrity, and moral commitment
had sunk, and further demonstrates beyond peradventure why he and his entire
coterie of managers and directors are not fit to have the control of a whelk
stall, never mind a public company.

I include his contemporaries in
this, because they would all have been aware that the report was being
compiled, and it is human nature that they would all have been aware of its
potential contents. In fact Tinney (who received a package worth around
£5 million a year in salary, bonus, share options and incentive payments) probably
took the fall to protect others, which is why I am saying that the combination
of a culture of dishonesty, moral bankruptcy and an integrity-free environment
make it clear that the company is too infected with the morality of the
back-alley thug, that place it well past redemption.

Tinney's announcement that he was
responsible for suppressing the report enabled Barclays to make an internal
announcement that he had resigned from his job last week. An internal
announcement, you notice, not a public one. So much for the new transparency at
Barclays that Jenkins was trumpeting!.

The report has exposed a culture of
fear, intimidation, bullying and mismanagement at the bank’s stockbroking and
investment arm, which is responsible for managing client assets worth
£184 billion.

This report has come at an acutely
embarrassing time for Barclays, as Anthony Jenkins now tries to regain public
trust after a series of deeply damaging scandals.

The suppressed report paints a
devastating picture of incompetence and arrogance at the bank, showing that
executives, among other wrongdoing;

Pursued a ‘revenue at all costs’
strategy.

Fostered a culture of fear and
intimidation.

Were ‘actively hostile’ to the idea
of compliance with banking rules.

Presided over a ‘broken culture’
where problems were ignored or buried.

Allowed the business to spin ‘out of
control’.

I have written and blogged repeatedly
of the criminogenic culture which exists within the investment banking arms of
global banks. These observations were not unique to Barclays.

I have advised the Regulators that
such a state of dysfunction existed, for many years. They have either derided
my observations or ignored my warnings.

This is why I have repeatedly said
that this banking culture is a clone of an organised criminal enterprise and needs
to be dealt with accordingly.

Part of the problem is that the
Barclays own Godfather, Roberto 'the Diamond Geezer' Diamante, brought other
Americans into the operation, men who believed that they knew how to manage
better than anyone else, (the 'What can the Brits teach us that we don't
already know' mentality), and who inculcated an atmosphere of fear and intimidation, refusing to countenance
any opposition to their style of managerial control.

I have worked for two major American
corporations and in my experience, bullying and intimidation is the sine qua
non of some managers' style. Many American managers try hard to achieve
consensus and to encourage their teams to think strategically, but some,
particularly those who have worked in Wall Street and the City of London, are
little more than a bunch of over-bearing braggarts and bullies. It grows out of
the US lack of any employment-protection legislation, and means that these
managers can get away with their dysfunctional behaviour and their rule of terror
because no-one dare challenge them for fear of being sacked on the spot. This
does not mean that many British managers are any better!

Again, this culture has become
endemic at Barclays Wealth, and it will not be easily eradicated. It generates
an environment where no-one is encouraged to make decisions or to feel
empowered to think laterally, because of the all-embracing 'blame culture' that
exists within the organisation. Again, for this reason, reform of the entity is
now beyond hope, and a complete dismantling of the organisation must now be the
preferred option.

Consider these quotations from the
Report, and question whether this institution is fit to be allowed to continue
in operation.

"...The current leadership team have
pursued a course of “revenue at all costs”, taken a conscious decision to
ignore support functions, reinforced a culture that is high risk and actively
hostile to compliance, and ruled with an iron fist to remove any intervention
from those who speak up in opposition..."

"...Management consciously
failed to invest in necessary technology, people and safeguards that it knew
it needed, leaving these areas understaffed, under-skilled, under-supported and
in disarray..."

"...A conscious choice was made
to ignore compliance until an issue was raised by the regulators – actively
inviting intervention. There has been a total lack of accountability by the
senior team..."

"...Management have created a
culture of dominance and fear that has removed escalation of issues [the
reporting of concerns up the management chain] and created a siloed
organisation with serious flaws. Issues do not flow up but are buried, stopping
any solution ever coming to light..."

"...This culture immediately
removes anyone who opposes the managing director Mitch Cox and his team or who
expresses dissent in any way… and prevents any counterbalance to the “revenue
at all costs” strategy..."

One banker stated; ‘When I reported
a compliance issue to a member of the management committee, I was told, “I
don’t have time for this bullshit.’ Another said: ‘When we presented the risk
report, an executive said “This is a piece of shit” – and threw it across the
room.”’

One senior manager is accused in the
report of being ‘incredibly defensive’ and of failing to take regulatory issues
seriously. Another executive is said to have been determined to stop the
inquiry team from gathering information. This individual, the report says, was
regarded by colleagues as a ‘key contributor to the current culture of fear’.

"...The senior team
portray themselves as all-powerful and all-knowing… and people chose to
disagree with them at their own peril. It is a mentality of superiority which,
when combined with other deficiencies, stops the team from tackling their blind
spots. When those deficiencies are in compliance, this results in serious
issues that no one else has the power to address.."

"...Stories
circulate of individuals who have been fired because they brought issues to the
management’s attention. It is culturally acceptable at BWA, from the top of the
organisation down, to ignore, put off, and even deride risk and compliance
issues..."

So, when taken as a
whole, it becomes clear that Barclays Wealth is a financial entity long since
past it's sell-by date. There is no excuse for the kind of behaviour and
overbearing conduct which was sanctioned and condoned inside the operation, and
it must now be closed down in the public interest.

When you come to review
the findings in the report, you quickly realise that the authors were talking
about an institution which had sunk into a state of profound anomie, a
dysfunctional, normless state of regulatory limbo, a kind of suspended ethical
animation, where normal conduct, regulatory compliance, honest behaviour, moral
insightfulness, all had been turned on their head, to satisfy the over-inflated
egos and over-paid men who ran the operation.

Institutions like this
have not achieved this status overnight. The rot was allowed to set in many
years ago, and it was encouraged to flourish and grow by an ad-mixture, of obscene
over-payments, the advancement of psychotic personalities, the promotion of rule-breaking
and other improper behaviour, the wholesale disregard for the rule of law and contempt
for the regulatory regime. Anyone still working in this environment is
compromised, their compliance officers tainted beyond hope of redemption, and
their systems damaged beyond repair. You don't reform entities such as this,
you recognise that like the rabid animal they have become, they need to be
humanely destroyed, in order to cleanse the wider industry and to expunge their
infected influence.

It must be observed that
their continued existence owes as much of its provenance to the failings of the
FSA as the lead regulator to identify severe failings in the structure,
management and overall conduct of business by the Barclays Wealth personnel.
Rogue institutions can only continue to conduct their illegal business when
those supposed to regulate their activities, are either wilfully blind to their
activities, or are too incompetent to see what is going on under their noses.

It may become necessary
to re-visit the motives and decisions taken by Andrew Jenkins to employ Hector
Sants as his new 'Head of Ethical Compliance' . Sants was in charge at the FSA
throughout this era of dysfunction. He should be called to account for his
failures to identify this criminogenic environment. The Parliamentary
Commission on Banking Standards should consider calling him back as a matter of
some urgency, if they want to retain a semblance of being thought to be a
serious attempt to review banking practice.

More and more examples
of appalling conduct and juvenile behaviour among Barclays' staff are being
published.

These stories will
continue to circulate, and they all add ammunition to the arguments of those
who now say, 'enough is enough', shut this monster down!

We have reached the
stage where we have to realise that by allowing these disgusting entities to
continue in business, that we are being failed by a Government which wants to
feather-bed the banks at all possible opportunities. If we want to see a
climate of ethical conduct, fair dealings and the highest possible level of regulatory
'best practice' being identified in our banking sector, it would be in
everyone's best interests if Barclays Wealth were to be placed into compulsory
liquidation, "...pour discourager les autres..!"

It beggars belief we are still being encouraged to believe banks will become trustworthy now that various inquiries have identified what went wrong. However, what went wrong is still being covered up and only coming to light via whistle blowers. This is hardly indicative of a banking fraternity wishing to reform. I am with you Rowan in that without criminal prosecution for banking crimes there is no incentive for those profiting from defrauding the majority to either clean up their act or repent. In the meantime it is the most vulnerable who suffer the consequences. Wrote this in disgust http://lifeafterdebts.blogspot.co.uk/

I'm reading 'The Financiers and the Nation' by the Right Honourable Thomas Johnston PC, ex Lord Privy Seal. This was writtem in 1934. If it wasn't for the slightly archaic language you'd think it was written yesterday.It's about banks and crooks, how they're protected and how they rob the nation. It's fascinating stuff.I found it here.http://archive.org/details/financiersandthe033017mbp

It really seems nothing has changed in centuries.Didn't someone say eternal vigilance is the price of freedom? Seems we're not vigilant enough when it comes to the financial class.The foreword is well worth reading. Says the excuse given for not weeding out crooks is always the same, "because it will hurt the legitimate businesses". Seems that hasn't changed since 1934 either.

About Me

Having spent my career dealing with financial crime, both as a Met detective and as a legal consultant, I now spend my time working with financial institutions advising them on the best way to provide compliance with the plethora of conflicting regulations and laws designed to prevent and forestall money laundering - whatever that might be! This blog aims to provide a venue for discussion on these and aligned issues, because most of these subjects are so surrounded by disinformation and downright intellectual dishonesty, an alternative mouthpiece is predicated. Please share your views with what is published here from time to time!